Gold Prices Find Solace Post-NFPs, CPI to Drive Next Week

New York (Oct 7)  Gold prices fell for the fourth consecutive week with the precious metal down nearly 0.5% to trade at 1271 ahead of the New York close on Friday. The losses come amid what seems to be an unstoppably rally in broader risk assets with the major U.S. equity indices up more than 1% on the week. Demand for gold has been soft with prices down nearly 7% off the September (yearly) highs before an NFP inspired late-week rally offered a brief reprieve to the recent downward pressure. 

A surprise U.S. Non-Farm Payroll report on Friday showed the economy shedding some 33K jobs last month, missing expectations for a gain of 80K. However, a closer look at the data reveals underlying strength in the labor markets with labor force participation rising to its highest level since March of 2014 at 63.1%. Wage growth figures were also stronger-than-expected with average hourly earnings posting a 2.9% y/y gain – up from a previous upwardly revised 2.7% y/y. With the recent barrage of hurricanes largely accounting for the weak headline figure, the broader labor market outlook remains firm and keeps the FOMC on target for a December rate hike. Fed fund futures are now pricing in a 90% probability for a 25bps hike before the end of the year.

Inflation data will be central focus next week with the U.S. Consumer Price Index slated for Friday. Consensus estimates are calling an uptick in the core rate of inflation to 1.8% y/y. September retail sales & the University of Michigan confidence surveys are also on tap with both expected to post stronger monthly figures. For gold prices, the outlook remains precarious and while we may yet see some further weakness, the broader technical view calls for a near-term low early in October trade.

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